Does Greater Lafayette have the potential to become the Midwest's next tech startup hub?

Oct. 27, 2012

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The offices of startup companies located here don’t boast the slides, treehouses or cool co-working spaces that increasingly grace the work spaces of some of the nation’s fastest growing firms.

And the dough that venture capitalists have invested in the area has stayed flat in recent years.

But hackers, makers and entrepreneurs say Greater Lafayette has the rest of the makings for what they hope will become the country’s next vibrant small startup scene — joining the ranks of Baltimore, Raleigh-Durham, N.C., and Huntsville, Ala.

Chief among the ingredients: Innovative ideas, and close access to major Midwest metropolitan hubs. It doesn’t hurt that the area is home to Purdue University, a top engineering institution next to Purdue Research Park, the largest university-affiliated tech park in the country.

“It’s easy to say that we’re just a tiny little town and I should just move to Chicago, but you can do it from right here,” said local entrepreneur Jason Tennenhouse. “You’ve got access to some of the brightest minds in the country. There’s a lot of little movements all over the place in this town, but you don’t recognize very much of it.”

Tennenhouse, who owns Greyhouse Coffee and Supply Co., is the interim president of Lafayette Tech, a fledgling local organization that aims to foster the local tech entrepreneurship scene. Members say the organization — and the area — is at a crossroads.

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“Lafayette is really unique in that there’s a lot of really big ideas, but it feels like a small community,” Tennenhouse said. “I’d like to see a healthier community, more people involved. I think Lafayette Tech’s role is recognizing the pieces and giving them an identity.”

The numbers

There are about 120 high-tech and life science businesses headquartered in Greater Lafayette, according to a September 2012 economic activity report from Greater Lafayette Commerce. Most are in the startup stage and employ fewer than five people. But big names such as cancer drug delivery researcher Endocyte Inc. are included in that count.

Investment deals by venture capitalists in the Lafayette metropolitan area over the past 12 years have stayed relatively flat — and low.

With a total investment of just more than $114 million during that period, according to the National Venture Capital Association, activity here is small compared with nearby Midwest cities.

Chicago, home to notables such as Groupon, Orbitz and about 550 other startups, has been the scene for 51 venture capital deals so far this year. In Indianapolis, that figure is nine, with more than $60 million in equity invested so far this year.

The opportunity

But a city’s popularity with venture capitalists isn’t everything.

The area’s proximity to the ideas and talent coming out of Purdue is its greatest asset, said Matt McKillip, executive director of Purdue Tech Ventures. McKillip said the university has started to run with that idea.

“I’ve seen a radical change in the relative importance that Purdue’s leadership is putting on this subject,” said McKillip, whose capstone project during his graduate studies at Purdue focused on how to speed up technology commercialization coming out of the university. “One of the big ideas is the whole idea of mentoring projects.”

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But those who don’t have a connection to the university can get lost in the shuffle.

“The average person is going to have to find resources on their own,” McKillip said. “But hopefully as you build up the community the disadvantages begin to disappear. All of these groups need to have a shared vision of where they want to go, what role they play in getting the community there, and work together with collaborative hearts to make that happen.”

Startups in the Lafayette area pride themselves on being down to earth, which they feel sets them apart from entrepreneurs on the coasts.

“There’s probably a small percentage of startups here that truly do want to be the next Facebook,” said Diana Morris, who is on Lafayette Tech’s executive board. “What I hear at the grass-roots level is that more and more people are concerned about what is going to benefit the community, not ‘Am I going to make a billion dollars?’ ”

Case in point: Tennenhouse, the interim Lafayette Tech president, also runs GreyMob Idea Acceleration & Design, which does strategies and brands for “startups with a purpose.”

The importance of fostering tech startups in the area is not lost on community leaders.

Besides being highlighted in the community’s “Community of Choice” initiative, local officials have been eager to assist Lafayette Tech. Lafayette Tech members said they were pleased to see Lafayette Mayor Tony Roswarski’s appearance at their Startup Weekend event earlier this year.

Greater Lafayette Commerce president Joe Seaman said he is eager to help the group potentially create a co-working space for nearby entrepreneurs — something the community feels is an important next step.

“I think there’s a real strong possibility that will happen,” Seaman said. “The value it brings to us is it provides another leg of the stool, another opportunity for younger people, entrepreneurs.”

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The challenge

Access to capital is a challenge. Since the area lacks an airport, tech startups near Lafayette said they don’t have the same connection to investors that they would have in a bigger city.

That reality hasn’t held Oren Shatken back. His Purdue Research Park-based tech company, FoundOPS, won Indianapolis’ firstStartup Bowl last week.

“We’re not lazy about the networking we do,” Shatken said. “It’s hard to convince people to fly all the way to Indianapolis to get on a one-hour shuttle to Lafayette, but we’ve got mentors in both Silicon Valley and Chicago. The biggest thing is talent and a strong intellectual framework.”

Morris said the area’s struggle to attract the attention of venture capitalists and angel investors could become less of a roadblock with some careful marketing.

“It’s all in the way you present it,” she said. “When you fly into Chicago or Indianapolis, it’s really not that far away. It just seems like the middle of nowhere. If you make it worth their time, they will come. There are some pockets of angels here in the Midwest that I don’t think we’ve scratched the surface of.”

Another challenge for the local tech scene: Lafayette Tech is in a transitional period. Its founder Nelu Lazar recently stepped down as president. Lazar said he wants to see the group thrive under a new leader.

“The general intents are to encourage and help create more ‘Made in Lafayette’ tech startups, give students a choice to stay in the area once they graduate and to grow their ideas by proactively mixing themselves with local professionals that could help, and to educate local community on emerging technologies,” he said.

The future

Greater Lafayette has established itself as a manufacturing hub. Morris said the community needs to start getting comfortable with embracing other identities.

“This idea of entrepreneurship, tech, is still very foreign,” Morris said. “The first step toward the future is helping the community feel comfortable with this idea of not having structure and not knowing where things are going. We’re going back to people being artisans, craftsmen, creators of their own destiny.”

Creating that comfort is a central goal of Lafayette Tech.

“We want to break down barriers of people that would never in a million years meet each other,” Morris said. “Meeting is critical. In all of this, I see the group as a hub of collaboration.”

Tennenhouse said collaboration leads to action.

“Building relationships leads to dreaming, and eventually dreaming becomes doing.”